Bank of Japan Disappoints, Risk Markets are Quiet

The Bank of Japan (BOJ) recently made a decision that disappointed the market. They chose to keep their monetary policy as is, rather than making changes that many had hoped for. This caused the value of the Japanese yen to weaken and led to a 1.4% increase in the Nikkei stock index.

Meanwhile, there have been efforts from members of the Federal Reserve in the US to push against expectations of future interest rate cuts. However, despite these efforts, the market still predicts a series of rate cuts starting in March 2022. As a result, the US dollar remains weak and the US dollar index has been consistently low. Additionally, US Treasury yields are also at their lowest levels in weeks.

These circumstances are expected to benefit gold, as the anticipation of future rate cuts often boosts its value. However, despite this expectation, gold’s performance has been relatively lackluster. It is currently trading at around $2028, with resistance points at $2032 and $2043. Despite any sell-offs, it is predicted that there will be buyers interested in gold, and the general trend in the coming weeks is expected to be an increase in its value.

In terms of stock indices, the S&P 500, NASDAQ 100, and Dow Jones have all reached new record highs. However, trading ranges have been smaller due to low market activity during the holiday season. There may be some profit-taking towards the end of the week, especially if the US inflation figure (known as the core PCE number) comes in higher than expected.

In the currency market, the Japanese yen has been the most significant player, weakening against other currencies following the BOJ’s decision. Other currencies like the Canadian dollar, euro, and sterling have also experienced some movement.

Overall, as the festive break approaches, the market is winding down and becoming less active. The US dollar isn’t showing much movement, stock indices are relatively stable, and gold is consolidating. The upcoming release of the Core PCE data on Friday is expected to bring a final burst of volatility before the market closes for a week and a half.